MassHealth Has Done It Again!
They’ve found yet another outrageous way to kill the middle class with long-term care costs.
I am quite saddened (disgusted, really) to report the Commonwealth’s latest attempt to force seniors and those needing long-term care to die broke. In a recent decision from the Supreme Judicial Court, MassHealth was empowered to continue doing just that.
The middle class gets hurt the most when it comes to long-term care. They aren’t wealthy enough to financially afford long-term care, with nursing home costs of $15,000 per month or more. Yet they have too much money to qualify for long-term care benefits.
With the right attorney, we can position your assets to help middle class and upper middle families qualify for long-term care and protect their assets. But the government is continually trying to limit the tools we can use to do so.
What is this new case decision about?
If you’re married and your spouse needs to go to a nursing home, MassHealth is going to come after your assets, even after your spouse’s death. In fact, even more so. If MassHealth pays out any long-term care benefits, their intention is to recoup from your spouse’s estate to the extent of any benefits paid out while your spouse was alive.
This recent case LAURIE A. DERMODY vs. EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES, dealt specifically with what we call “Medicaid Compliant Annuities”. An annuity is really just a contract with an insurance company where a lump-sum amount is paid to the company, and the company pays you back on a monthly basis, plus interest. In simplest terms, the annuity helps us to lower your asset value and get you below the limit, provided you do it correctly! You can learn more about Medicaid annuities here.
In this case, we had a married couple where the wife needed nursing home care, while the husband would continue to live at home. The couple had too much money to qualify for benefits, so they set up an annuity in the name of the husband. The husband would receive the annuity payments, and the wife could receive long-term care benefits through MassHealth. MassHealth would not be paying anything to the husband directly or paying for his care. The couple’s daughter was the beneficiary of the annuity, and when the husband passed away, the leftover funds were supposed to go to her. MassHealth put a stop to that.
The rules say (or used to say) that the spouse or a child could be the beneficiary of the annuity, and receive any money left over. Not anymore though! This case changed all that. MassHealth wants the annuity funds, even if taking them would leave the surviving spouse dead broke, or if the money was supposed to go to the children.
Can the court actually to do this?
Yes. They can. And they have. The court ruled that the annuity beneficiary could only collect left-over annuity funds, AFTER MassHealth first recouped whatever they paid out for benefits. Remember, the annuity was not taken by the nursing home spouse. The annuity was taken by the at-home spouse (sometimes called the “community spouse”), and the at-home spouse did not receive any direct benefits from MassHealth. But his wife in the nursing home did. Even though the annuity belonged to the at-home spouse, and MassHealth didn’t pay the at-home spouse one dime, they can still collect after the at-home spouse dies. That means MassHealth could take ALL the remaining annuity funds!
The court’s decision is based on an interpretation of the Deficit Reduction Act (DRA). One of the requirements of the DRA is that annuities must name MassHealth as the primary remainder beneficiary on the death of the at-home spouse. The court agreed with MassHealth, stating that the Deficit Reduction Act (DRA) does not include an exemption from naming MassHealth as the beneficiary, even if the annuity is purchased for the sole benefit of the at-home spouse. This rule contradicts a separate part of the law, but the court didn’t care.
The court stated, “When affluent individuals engage in schemes to hide assets to qualify for programs to which they are otherwise not entitled, their actions improperly "divert scarce Federal and State resources from low-income [qualifying individuals].”
In other words, if you worked hard all your life, paid taxes, and saved some money instead of spending it all at the casinos, you aren't entitled to benefits in the eyes of the court. Then, when you pay $15,000 or more per month for nursing home care, until you’re basically broke (the single person asset limit is $2,000) you could apply for benefits at that time.
It’s a travesty and an injustice to our hard-working seniors.
What does this mean for estate and elder planning?
It means we must be even more careful when doing long-term care planning, especially if we use annuities. Annuities are still a viable option, when used correctly, but the court has made the road a little harder.
This decision also proves the need for PRE-planning. A Medicaid annuity is usually a technique used when the need for long-term care is immediate. But if we plan ahead, while everyone is healthy, we have a lot more options available to us for protecting assets.
This is where traditional estate planning often fails – it’s too focused on death and not on the more likely scenario where people live into old age and might need long-term care. That’s why Wealth Preservation Planning is so important, as is planning ahead.
Don't put it off any longer, there is no better time to plan for the future than now! If you want to learn more about estate planning and the process of passing on your legacy to your loved ones download Attorney Michael Monteforte Jr.’s FREE book “Planning Ahead.”
If you are ready to get started with your estate planning give us a call at 978-494-5036!
